Adecco says tough market ahead as profit falls

Adecco , the world's biggest staffing firm said on Wednesday it was bracing for challenging conditions in the short term as it posted an 83 percent drop in first-quarter net profit, beating forecasts.

Adecco's net profit fell to 23 million euros ($30.80 million), ahead of the average estimate of 10 million euros in a Reuters poll of 10 analysts, as companies have been scaling back hiring in the recession.

Visibility is very low, making it very difficult to predict when the bottom of the staffing market will be hit, Chief Financial Officer Dominik de Daniel told Reuters.

Adecco and rivals Randstad , Manpower , Michael Page and Hays are facing tough markets as companies recruit fewer staff in an effort to cut costs during the economic slowdown.

Adecco, which has already shut branches and cut jobs to protect its margins, said it expected the low demand for workers to continue in the near term and De Daniel said the company would take further steps to cut costs if necessary.

De Daniel said he was confident Adecco would be able to reach its EBITA margin goal of 5 percent when markets recovered thanks to the steps the company had taken to lower costs. But he said it was impossible to say when the upswing would come.

The pace of revenue decline accelerated in the first quarter, falling 28 percent to 3.7 billion euros, with France, the United States, Germany, Britain, Japan and Italy all posting double-digit percentage drops in revenue.

Adecco, which last month named Barry Callebaut head Patrick De Maeseneire as its new chief, is seeking to increase its presence in the area of higher-margin professional staffing and de Daniel said the group was on the prowl for businesses in this area to buy.

He said the group was in a position to spend up to 1 billion euros, which includes 400 million euros in treasury shares, on acquisitions but was not under any pressure to buy.

Adecco trades at 18.6 times 2010 earnings, while Randstad trades at 19.2 times.